Sunday, June 3, 2018

Canada and Mexico have been allowed to structure their international trade deals around an ability to provide access to coveted $20 trillion U.S. market. Both nations demand this back door model continue-tcth, sundance...Update: Trudeau acknowledges problem of China using Canada to get its steel into US

Unfortunately for the politically-minded Justin Trudeau and Foreign
Minister Chrystia Freeland what they both don’t understand is that
President Trump doesn’t care about their delicate sensibilities and
blame-casting maneuvers. POTUS Trump was elected specifically because he
doesn’t apply a political prism in front of economic or national
security decisions.

NAFTA is dead, all three countries know it, and the aspect that both
Canada and Mexico have only recently become aware of is Trump is in no
rush to announce it. President Trump is in no rush to announce it
because the effects of withdrawal are already well underway. Investors
are not going to invest in Canada and Mexico while the looming uncertainty of a U.S. NAFTA exit looms in the air.

What PM Trudeau doesn’t mention [nor FM Chrystia Freeland ] is that
U.S. steel is actually U.S. auto-sector steel being shipped just across
the border to be used in U.S. owned manufacturing plants in Canada. Take
that away and the entire steel narrative is lost.

Canada doesn’t make much steel and aluminum, because the
Trudeau-minded do-gooder environmentalists in Canada have killed off
their heavy manufacturing industrial base. Which is exactly what
President Trump is attempting to ensure doesn’t happen in the United
States.

The essential problem with NAFTA was an evolution over time. In its
current form NAFTA became an exploited doorway into the coveted U.S.
market. Asian economic interests, large multinational corporations,
invested in Mexico and Canada as a way to work around any direct trade
deals with the U.S.

By shipping parts to Mexico and/or Canada; and by deploying satellite
manufacturing and assembly facilities in Canada and/or Mexico; China,
Asia and to a lesser extent EU corporations exploited a loophole. Through a process of building, assembling or manufacturing their
products in Mexico/Canada those foreign corporations can skirt U.S.
trade tariffs and direct U.S. trade agreements. The finished foreign
products entered the U.S. under NAFTA rules....

If you understand the reason why U.S. companies benefited from those
moves, you can begin to understand if the U.S. was going to remain
inside NAFTA President Trump would have remained engaged in TPP.

As soon as President Trump withdrew from TPP the problem with the
Canada and Mexico loophole grew. All corporations from TPP nations
would now have an option to exploit the same NAFTA loophole.

Why ship directly to the U.S., or manufacture inside the U.S., when
you could just assemble in Mexico and Canada and use NAFTA to bring your
products to the ultimate goal, the massive U.S. market?

From the POTUS Trump position, NAFTA always came down to two options:

Option #1 – renegotiate the NAFTA trade agreement to eliminate the loopholes.That would require Canada and Mexico to agree to very specific rules
put into the agreement by the U.S. that would remove the ability of
third-party nations to exploit the current trade loophole. Essentially
the U.S. rules would be structured around removing any profit motive
with regard to building in Canada or Mexico and shipping into the U.S....

The
problem in this option is the exploitation of NAFTA currently benefits
Canada and Mexico. It is against their interests to remove it. Knowing
it was against their interests President Trump never thought it was
likely Canada or Mexico would ever agree. But he was willing to explore
and find out.

Option #2 – Exit NAFTA. And subsequently deal with Canada and Mexico individually with
structured trade agreements about their imports. Canada and Mexico
could do as they please, but each U.S. bi-lateral trade agreement would
be written with language removing the aforementioned
cost-benefit-analysis to third-party countries (same as in option #1.)

This is not direct ‘protectionism’, it is simply smart and fair trade.

Unfortunately, the U.S. CoC [US Chamber of Commerce lobby], funded by massive multinational
corporations, is spending hundreds of millions on lobbying congress to
keep the NAFTA loophole open.

The U.S. has to look upstream, deep into the trade agreements made by
Mexico and Canada with third-parties, because it is possible for other
nations to skirt direct trade with the U.S. and move their products
through Canada and Mexico into the U.S.

The issue of Canada and Mexico making trade agreements with other
nations (especially China), while brokering their NAFTA position with
the U.S. as a strategic part of those agreements, is a serious issue
that cannot adequately be resolved while the U.S. remains connected to
NAFTA.

In essence, the auto-sector is representative of much of the
manufacturing exploitation by multinational corporations beyond vehicle
production. China has supported this approach because they produce the
components for multiple sectors (furniture, appliances etc).

So you see, if you just look at the pure economics of the options,
and you remember that President Trump is constitutionally antithetical
to anyone having influence over U.S. interests other than the American
people inside the United States, you can clearly see there is only
one-way this entire process ends.President Trump will end NAFTA.

Withdrawal is not a matter of “if“, it is simply a matter of “when”.

The economic reality drives the “if”, the political reality drives the “when”.

POTUS Trump knows the multinational corporations and multinational
banks will trigger their CoC purchased politicians in Washington DC as
soon as Trump announces.The GOPe Republicans and Corporatist Democrats
will launch everything they have against him in a public relations
effort to stop the exit. There are trillions at stake.

As the tax reform benefits gain a foothold, American workers are
realizing they are getting more money in their paychecks; and as the
U.S. economy continues to gain momentum, that’s the backdrop for
President Trump making the announcement.

Remember, when the U.S. team leaves NAFTA, the generally accepted
hit to the U.S. stock market will be around 10%. This is due to Wall
Street multinational corporations being the largest benefactors of the
current status.

If Wall Street multinationals lose the NAFTA loophole benefit, they
will initially make less profit until they reposition their investment
assets according to the new trade structure.

However, in the past year more companies have shifted capital in
preparation for the possibility of NAFTA being fundamentally
restructured. So the ramifications are less now than they were mid-year
2017. In 2018 this overall NAFTA exit possibility is more ‘factored-in’
to the overall market valuation than it was in 2017.

We saw this on
June 1st when the Steel and Aluminum tariffs went into effect and the
stock market barely moved.

It is common sense that Wall Street having been the biggest
benefactor of NAFTA, will stand to lose the most in any NAFTA
restructuring. Conversely, Main Street was the biggest loser in NAFTA,
and Main Street will stand to gain the most from NAFTA restructuring
which creates equity in trade opportunity.

That ‘America-First’ approach is one of the cornerstones of MAGAnomics."